Dear Dr. Don,
Against our better judgment, we co-signed for a couple of student loans for the sister of a sister-in-law. At the time, our sister-in-law assured us that she would step in and pay if her sister failed to make the payments. Unfortunately, we didn’t get anything in writing from them. Now her sister isn’t making any payments. The sister-in-law indicates she doesn’t remember making any promises to help. Both women have failed to respond to our requests for payment. The bank is garnishing our account, which is funded only with our Social Security checks and a small pension benefit. Do we have any legal recourse or are we sunk?

I would appreciate any assistance, recommendations or suggestions.

Thank you,
— Robin Redress

Dear Robin,
I’m sorry that you got backed into this financial corner. This is a lesson that others should remember when they’re asked to co-sign on any kind of loan.

If you are even thinking about it, having a federal student loan debt discharged in bankruptcy is virtually impossible. So, that’s probably not an option. If payments aren’t being made, the government may, in fact, garnish Social Security benefits for loan repayments. It can take up to 15 percent of your monthly Social Security benefit, as long as it doesn’t reduce your monthly benefit below $750. Unfortunately, the IRS can reduce any federal tax refund coming to you and send the money toward the student loan balance.

You might sue the primary borrower for the payments you’ve made on the loan. If a court awards you a judgment, you could then ask to have the primary borrower’s funds garnished.

Some borrowers don’t have assets to seize. You should speak with an attorney to explore any legal options. I’d wonder if the original borrower has any money or assets to go after. Whether the sister-in-law’s spoken promise to cover her sister’s missed payments is enforceable is another question for the attorney.

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